All posts by M-

While cruising MLS the other day, I came across V891550, a 35-year-old leasehold 3-bed condo in False Creek, asking price: $519K for 1248 sq.ft.

At first, I thought it sounded quite reasonable– $416/sq.ft. So my first thought was that it must be a leaker. It is, but the seller is paying the assessment. So far so good. But there must be a catch, right? Right. The (prepaid) lease expires in 2036, so the condo’s value drops to $0 then– all you have in 2036 is a share in a building which no longer has any right to the land. And a building that can’t be moved, with no land underneath it, is worthless.

Which makes this condo an interesting study– if somebody takes out a mortgage to buy it, they can’t amortize longer than 25 years. They can’t rely on appreciation in the long run, because it’s a foregone conclusion that the condo value disappears in 2036. Or you can keep the building then, but you have to lease the land all over again.

That’s the cost of “ownership” over the next 25 years. With the value dropping to zero at the end, and no potential for land appreciation upside. And I’m assuming there won’t be any special assessments in the future, which isn’t a guarantee in this part of the country.

Looking at the listing, it was built in 1976, and the interior doesn’t look like it’s seen a whole lot in terms of modernization– carpets, paint, countertops, but that looks about it. And the countertops are looking dated again. There are no photos of the bathrooms, so who knows what’s in there. At any rate, if I were to buy a place like this, I’d probably look to renovate it with newer finishings.

Is it just me, or does this seem crazy? $3,300 per month for a 3-bed 1976 condo for the next 25 years? And you get to live through a leaky condo repair, and it needs renovations on top of that price? And there’s no potential upside in land values? And interest rates could rise? Jeebus.

The realtor’s property details can be found here: http://joanmontgomery.com/mylistings.html/details-19315068